Related papers: Risk-return arguments applied to options with trad…
We present our approach to the problem of how an agent, within an economic Multi-Agent System, can determine when it should behave strategically (i.e. learn and use models of other agents), and when it should act as a simple price-taker. We…
Perfectly rational decision-makers maximize expected utility, but crucially ignore the resource costs incurred when determining optimal actions. Here we employ an axiomatic framework for bounded rational decision-making based on a…
We study the problem of maximising terminal utility for an agent facing model uncertainty, in a frictionless discrete-time market with one safe asset and finitely many risky assets. We show that an optimal investment strategy exists if the…
This essay discusses the advantages of a probabilistic agent-based approach to questions in theoretical economics, from the nature of economic agents, to the nature of the equilibria supported by their interactions. One idea we propose is…
This paper formulates a model of utility for a continuous time framework that captures the decision-maker's concern with ambiguity about both volatility and drift. Corresponding extensions of some basic results in asset pricing theory are…
Value adjustment of uncollateralized trades is determined within a risk-neutral pricing framework. When hedging such trades, investors cannot freely trade protection on their own name, thus facing an incomplete market. This fact is…
We describe a simple model for speculative trading based on adaptive behavior of economic agents.The adaptive behavior is expressed through a feedback mechanism for changing agents' stock-to-bond ratios, depending on the past performance of…
We consider a continuous time Principal-Agent model on a finite time horizon, where we look for the existence of an optimal contract both parties agreed on. Contrary to the main stream, where the principal is modelled as risk-neutral, we…
A mean-reverting financial instrument is optimally traded by buying it when it is sufficiently below the estimated `mean level' and selling it when it is above. In the presence of linear transaction costs, a large amount of value is paid…
In economics, there are many ways to describe the interaction between a "seller" and a "buyer". The most common one, with which we interact almost every day, is selling for a fixed price. This option is perfect for selling a mass product,…
The paper considers an investment timing problem appearing in real options theory. Present values from an investment project are modeled by general diffusion process. We prove necessary and sufficient conditions under which an optimal…
We consider a repeated auction where the buyer's utility for an item depends on the time that elapsed since his last purchase. We present an algorithm to build the optimal bidding policy, and then, because optimal might be impractical, we…
In the classical principal-agent problem, a principal must design a contract to incentivize an agent to perform an action on behalf of the principal. We study the classical principal-agent problem in a setting where the agent can be of one…
The objectives of option hedging/trading extend beyond mere protection against downside risks, with a desire to seek gains also driving agent's strategies. In this study, we showcase the potential of robust risk-aware reinforcement learning…
In this paper, a new framework to study weighed networks is introduced. The idea behind this methodology is to consider that each node of the network is an agent that desires to satisfy his/her preferences in an economic sense. Moreover,…
Optimal pricing of European call option is described by linear stochastic differential equation. Trading strategy given by a twin of stochastic variables was integrated w.r.t. Black-Scholes formula to adopt optimal pricing to tarading…
We develop a model to study the role of rationality in economics and biology. The model's agents differ continuously in their ability to make rational choices. The agents' objective is to ensure their individual survival over time or,…
We introduce a class of robust control problems formulated in min-max form, in which the principal agent is viewed as a central planner facing Nature. The agent's cost is a nonlinear function of all its possible realizations, encompassing…
We study a dynamic asset pricing problem in which a representative agent is ambiguous about the aggregate endowment growth rate and trades a risky stock, human capital, and a risk-free asset to maximize her preference value of consumption…
This paper is an original attempt to understand the foundations of economic reasoning. It endeavors to rigorously define the relationship between subjective interpretations and objective valuations of such interpretations in the context of…